What are you cutting in your budget to absorb the Payroll Tax increase?

[eliza61]

It is no longer there. The only people who can say they aren't giving anything up are those who put it into a retirement account. If they drop that, they could argue that $200 into ss or their ira are both retirement savings--similar, if not exactly the same, budget categories. Those who say they aren't cutting must mean they don't budget. They will get a smaller paycheck, so there will be smaller something (short term savings?) even if they don't notice it.

I get what your saying but I disagree. I do budget but as others stated I knew the 2% was temproray so when I got the extra I left it in my discretionary savings. Since my discretionary spending has not increase I don't have to change my budget AT ALL. I've also been lucky also in that I've gotten a 3% raise over the year.

I guess when op said "cutting" I took that to mean a negative hit to my budget. That will not happen

I think the folks who are feeling it are the ones who changed their budget to reflect the increase and now have to change it again to reflect the loss.

It's like over time at my job, we advise people that it is nice when you get it but do not begin to budget it in because it is not guaranteed. And year after year we get people crying when the over time has dried up because they planned that money for some thing.

 

[maxiesmom]

Noooo. . .it was just never IN the budget. It was extra "play money." It was supposed to stimulate the economy and get us to buy things. I either chocked it into savings or spent it on things that I don't really need or spent it on charities. I figured one was good for MY eventual retirement stimulus and the other two were the purpose for which it was meant. The fact that we're not cutting back is BECAUSE we budget, and we always knew that $200 wasn't going to be there long term.

So many people seem to have forgotten that. Sounds like you are in a good spot.

 

[rnorwo1]

Noooo. . .it was just never IN the budget. It was extra "play money." It was supposed to stimulate the economy and get us to buy things. I either chocked it into savings or spent it on things that I don't really need or spent it on charities. I figured one was good for MY eventual retirement stimulus and the other two were the purpose for which it was meant. The fact that we're not cutting back is BECAUSE we budget, and we always knew that $200 wasn't going to be there long term.

I think people are just interpreting "cut back" in different ways... I think the OP just means where will this affect spending/saving habits... So in your case it will just be $200 (or whatever amount) not saved, not donated, or not blown. But others see "cut back" as now having to do without something because they counted on that money. Same outcome, just different connotations.

For us, we haven't budgeted (in the sense that I have everything pre-planned and expenses tracked) in quite some time, despite having a nice budget plan all set up in that pricey YNAB I bought we pay all of our bills, put money in savings, and then we make sure that we spend wisely and always have some left over. So I have no clue where we will "cut back" because I only have a general idea of where it was going in the first place. But since we will not go into debt and because I live to plan our vacations, it will most likely be "cut back" in groceries, unnecessary clothing, eating out. We are very fortunate that we shouldn't feel the decrease at all since we never counted on it, but it will still technically be something cut out of monthly expenditures/savings. One situation where not budgeting helps a little psychologically, lol!

 

[eliza61]

So maybe the true question is not what you are cutting but whether or not you have to "cut" some thing out of your budget.

seems to be two different views.

 

[Danibelle]

Did people honestly not know it was reverting back?

It shouldn't have been a surprise.

This was never meant to be permanent. I can't ever remember when I paid less than 6.2% except for these past 2 years!

 

[aclov]

Can someone help me with the math here on the increase as I haven't received my first check...it's 2% per paycheck can I multiply that by my annual salary than divide by number of pay checks(26)?

 

[Shelly F - Ohio]

Last month we cut our mortgage interest rate by almost 1/2 by refinancing from 4.25% to 2.50 thanks to my DH company offering to pay closing costs for their bank employees.

If you are able to refi the rates are great and the savings can end up saving you thousands over the life of your loan.

 

[ilovemk76]

Surprise or not, it's happening, and every working american is going to have to cut back somewhere. Whether you figured out where that was months ago, or you're figuring out that now, it's a fact. The thread didn't ask if people were surprised, it asked where people are cutting back. --Katie

Two years ago working Americans upsized their living style by 2%. They now need to return to the pre-upsize life style. As a result the money should come from what was upsized.

For us that would be saving. We were already maxing out our 401k, including the catch up contribution, or that is where it would have gone.

 

[SaraJayne]

If you are not cutting back on anything how are you making up for the lost income?

The carry-over from month to month will be less, that is all.

 

[SaraJayne]

No cut backs here either-the month to month carry over gets smaller thats all-this tax 'holiday' had to be one of the worst ideas in history. People got dependant on that extra income, which would go away at the end of the holiday and it screwed us all in the future.

Sorry, I should have read ahead and just agreed with jsmith.

 

[punkin]

Since it is the New Year, DH and I have to make time to sit down and make a new budget anyway. We have not yet done it. I am expecting increased expenses this year so it will be tough.

 

[ttfn3]

My husband and I are public employees and did not experience the 2% temporary cut in the social security tax (we pay into a separate state retirement system not social security). Never see a peep about not all employees experienced the temporary reduction.

Frankly, the cut never made sense to me since the social security system is in need of money. I understand they did it to "stimulate" the economy. However, it definitely affects the social security retirement system.

Good for those that saved the "temporary" reduction and put in into your retirement savings!

 

[ilovemk76]

Can someone help me with the math here on the increase as I haven't received my first check...it's 2% per paycheck can I multiply that by my annual salary than divide by number of pay checks(26)?

Take your annual salary and multiply by .02. This is the total you will pay in increased SS tax. Divide this number by you number of checks (26 in your case) to get the decrease per paycheck.

 

[ekatiel]

Can someone help me with the math here on the increase as I haven't received my first check...it's 2% per paycheck can I multiply that by my annual salary than divide by number of pay checks(26)?

Take your annual salary and multiply by .02. This is the total you will pay in increased SS tax. Divide this number by you number of checks (26 in your case) to get the decrease per paycheck.

This works unless you make more than $113,700. Only the first $113,700 is taxed, so if you make more than that, you'll have to factor that in. --Katie

 

[turkeymama]

Since it is the New Year, DH and I have to make time to sit down and make a new budget anyway. We have not yet done it. I am expecting increased expenses this year so it will be tough.

This is us as well. DH just started a new job and I've only been back at work for a year. On the flip side, DH's VA benefits were increased this year. We won't notice the increase in withholding like other families. Just reworked our budget last night and we are finally going to build into long term savings, mostly because we are finally able to do so.

 

[disbound09]

As far as cutting back I fortunately don't have to, good investing, planning and luck. The people who are close to the threshold at some point may need to make changes but hopefully we start to grow our way out of this mess.

 

[angierae]

Well, since the 2% is a heck of a lot less than $200 a month for me (more like just under $50) I probably won't even notice it.

And like others have said, it wasn't "free money" in the first place, it was temporary money, so if my budget was so close that that 2% was going to make or break me, I never would have depended on it in the first place.

Honestly, I probably spend $24 a paycheck on pop from the vending machine at work or gum at 7-11, or whatever. I won't notice it.

Now, completely unrelated, my goal in 2012 is to not buy my lunch at work at all this year, so I'll probably come out way ahead anyway, since there were times I was spending $30/week on lunches, which is more than 2x what I'll "lose" by our tax rate going back to what it's supposed to be.

 

[goodeats]

DH got a 2.88% raise in December. We increased his 401K by 1%, so the payroll tax increase will just net out with the rest of his raise. I'm expecting his paycheck to be slightly lower, but not by much.

We (ok I was!) were planning on increasing our housecleaners to every 2 weeks instead of monthly. But now we'll keep them the same.

 

[The Iron Giant]

Nothing. I pretty much understood that the payroll tax was not permanent so I didn't start spending the extra cash. It went into my discretionary spending and some times my 401K so I'll just readjust that.

So I guess that means you are cutting back on discretionary spending and on your 401K, right?

 

[ilovemk76]

This works unless you make more than $113,700. Only the first $113,700 is taxed, so if you make more than that, you'll have to factor that in. --Katie

True. That is a more complicated calculation and I did not want to get into it.